Land non-availability keeps big-ticket FDI away from city

Investors look beyond Bangalore; land is a constraint
Financial Express

BANGALORE: In attracting FDI, Karna-taka ranks second, just behind Maharashtra, thanks to the presence of large IT MNCs in Bangalore. Over the past 13 years, 1,338 foreign companies, in software, hardware, electronics, electricals and engineering, made their presence felt in the state. Other sectors include automobiles, drugs and chemicals, food processing, textiles and power.

According to the Centre for Monitoring Indian Economy, Karnataka attracted Rs 22,628.72 crore FDI between January 1997 to October 2004, with an 11% share in all-India FDI approvals.

Interestingly, Karnataka received over Rs 2,000 crore FDI investment, every year, from 1995 to 2000. However, investments declined considerably in 2001 and 2003-04. “Karnataka, particularly Bangalore, became the hub for IT activities in India. For the last couple of years, other cities such as Pune, Hyderabad, Gurgaon and Chennai have been competing with Bangalore for projects,” said N Gokulram, principal secretary, industries and commerce.

Due to this competition, Bangalore has lost out on some big FDI projects. For instance, Nokia, which wanted to set-up its development facility in Bangalore, eventually decided in favour of Chennai. “Other states have started offering incentives such as free space or space at low prices. We are not in a position to offer such incentives, as we don’t have such large sites to offer,” claim officials from Karnataka Udyog Mitra, the nodal agency for approving investments in the state.

“IT companies ask us to provide land near the electronic city. All government land in that area, up to 600 acres, has been allotted. Land prices, quoted at Rs 20 lakhs per acre in 2002, are quoting at Rs 80 lakh per acre in these areas. We are looking at developing other parts of Banga-lore, such as Tumkur road and Mysore road,” said an official. Every year Karnataka Udyog Mitra receives requests to allot over 1,000 acres in Bangalore, he claims.

For the current year, the state anticipates FDI in apparel, tourism, steel, and automobiles along with IT. “Non-IT companies are considering presence outside Bangalore, which will help in developing other cities,” he said. Karnataka expects to add another 200 MNCs this year with an investment to the tune of $500 million.